Is Reserve-Ratio Arithmetic More Pleasant?

Does it matter in a revenue-neutral setting if the government changes the inflation tax base or the inflation tax rate? We answer this question using an overlapping generations model in which bonds, capital, and cash reserves coexist, and the government uses seigniorage to service its debt, choosing between changing either the inflation-tax rate or the reserve requirement (the inflation-tax base). The former option produces standard "unpleasant arithmetic". Somewhat surprisingly, lower reserve requirements fund the government's interest expense; long-run inflation (welfare) is lower (higher) in comparison. Thus reserve-ratio arithmetic may be "pleasant" even when money growth arithmetic is not